Who Needs Branches Anyway?
Predicting the future is a perilous business. What appears futuristic is probably already being implemented at some innovative future branch pilot somewhere.
Historically the mainstay of the branch was cash and cheque usage; however, both are in decline. With both in decline plus an increase in self-service at branch, the traditional reasons to visit a branch are dwindling. In response branches have been repositioned as advice centres.
However, banks continue to target an increase in the number of products sold through direct channels. The current average of banking products sold through the branch is less than 50%, and the target is to get that much lower. So a “plan B” (making branches the place you go to for an “advised sale”), probably isn’t a long term reason to maintain the current levels of real estate.
We saw the reaction from some quarters when the Payments Council in UK tried to engineer an end to cheque processing. There are still millions of bank and building society customers who hold passbooks that can only be processed in a branch. So there is a demographic that is slow to embrace change, and will continue to require branch services for a decade or more.
There is also a good deal of negativity around branch closure schemes and especially “closing the last branch in town”.
Finally there are also security concerns around some digital channels which prevent their adoption, this demographic is much larger than the segments mentioned above.
However, a channel that uses biometric identification is the most secure channel currently available. I would add the caveat – as long as the base biometric data being used for comparison was captured and stored securely and the person providing the biometrics data was properly identified and verified. This is a process best done face to face. Once captured and made available to all channels, biometric identification is the best proof of identity, some of which will last a lifetime.
This is going to be a new and growing requirement that will temporarily increase the branch footfall.
In conclusion, there is a role for branches, less to do with cash and cheque, and in the future less to do with product sales. There is a market segment who will always choose a bank with a branch channel, so banks who target this segment will require a branch network.
As we transition to a new model of banking, branches have a role to play capturing and securing biometric data. This will open up a world of opportunity for other channels.
So branches aren’t just expensive billboards and it is not just a legacy for unpopular banks – too scared to close empty branches. There is a role for the branch to play in enabling cheaper more convenient channels in the future, along with a number of other functions that we are not yet ready to pension off to the post office.